Aeva Technologies, Inc.

Good day. My name is Shamali, and I will be your conference facilitator. I would like to welcome everyone to AVA Technologies' fourth quarter and full year 2023 earnings conference call. During the opening remarks, all participants will be in a listen-only mode. Following their opening remarks, we will conduct a question-and-answer session. As a reminder, today's conference call is being recorded and simultaneously webcast. I would now like to turn the call over to Andrew Fung, Director of Investor Relations. Andrew, please go ahead.

Thank you, and welcome everyone to Ava's fourth quarter and full year 2023 earnings conference call. Joining on the call today are Sarush Salahian, Ava's co-founder and CEO, and Saurabh Sinha, Ava's CFO. Ahead of this call, we issued our fourth quarter and full year 2023 press release and presentation, which we will refer to today and can be found on our investor relations website at investors.ava.com. Please note that on this call, we will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views only as of today and should not be relied upon as representative of our views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risk and other important factors that could affect our financial results, please refer to our filings with the SEC, including our most recent Form 10-Q and Form 10-K. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of AVIS performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. The webcast replay of this call will be available on our company website under the investor relations link. And with that, let me turn the call over to Surush.

Thank you, Andrew, and good afternoon, everyone. 2023 was a landmark year for AVA. we reached a number of critical milestones that we believe puts us in a strong position to continue to lead in a growing adoption of FMCW LiDAR in automotive and beyond. I would like to highlight our key accomplishments. First, as we announced at CES, Daimler Truck selected AVA to be the exclusive supplier of long-range and ultra-long-range LiDARs for their series production vehicle program. As one of the world's largest commercial OEMs and a leader in deploying new technologies, Daimler Truck is very committed and well-positioned to commercialize highway autonomy at scale. Our production agreement with Daimler Truck as a Tier 1 supplier for series production is a massive validation of the performance, maturity, and manufacturability of our unique 40 LiDAR. Second, we also secured production agreements elsewhere. such as with May Mobility, where AVA-40 LiDAR will be used to broaden the operational design domain of May vehicles. In industrial, we signed our first production agreement with Nikon, where we will leverage our LiDAR-on-chip technology's ability to deliver micron-level precision to power Nikon's high-precision industrial inspection products. Third, we announced and demonstrated Atlas, which is the world's first automotive grade 4D LiDAR designed for auto mass production. Atlas utilizes our latest silicon innovations, including Core Vision, our fourth generation LiDAR on-chip module, which integrates all optical components onto an even smaller silicon photonics platform, as well as X1, AVA's new powerhouse system-on-chip processor for signal processing and perception software. And fourth, we exited 2023 in a strong financial position. With $346 million in cash and facility and no debt, AVA has significant capital to support both our existing customers beyond their SOPs and execute on additional program wins in our pipeline. Let's now discuss in more detail our recent business developments. The Diamond Truck Series Production Program is a breakthrough win for Ava and a significant positive development for the industry, not only for the size of the opportunity, but also the validation of our technology and maturity from one of the largest and most reputable commercial vehicle OEMs in the world. This is a clear indication of the industry's growing appreciation and shift towards FMCW technology to enable even more advanced ADAS and highway autonomy functionality in vehicles. In this multi-year production program, AVA will act as a direct tier one to Diamond Truck, supplying both long-range and ultra-long-range 4D LiDAR. This will enable highway seat autonomy for Diamond Truck's first production launch, starting with FreightLiner's Class 8 platform, which has volumes of around 100,000 vehicles annually. We will also work closely with TORQ, Steinmeier Trucks' independent subsidiary developing the AVStack, to integrate AVOS sensors and perception software. The multiple number of sensors per vehicle and the level of integration results in significant content per vehicle that is multiples higher than a typical passenger vehicle program. Together with a modest take rate that ramps over a multi-year period, we estimate a forward-looking order book of $1 billion over the estimated lifetime of the program. We are working towards our start of production in 2026 to support Diamond Truck's production ramp by 2027. This win comes after multiple years of deep collaboration with Diamond Truck. As we enter the next phase, we're off to a strong start. In Q1, we have already shipped many AVA sensors for Daimler Truck and Torx fleet of vehicles and expect to increase product shipments over the course of this year. I would like to now elaborate more on why Daimler Truck selected AVA. Safety deploying highway autonomy at significant scale is a top strategic focus for Daimler Truck and the OEM sees AVA-40 LiDAR as a key enabler because of our technology opening up some of the most challenging highway driving use cases and the manufacturability of our technology. This determination comes after in-depth evaluation of AVA 40 LIDAR's ability to meet Diamond Truck's stringent performance requirements. Over the course of multi-year collaboration, AVA's combination of industry-leading range, instant velocity for every point, and immunity to interference was instrumental in achieving a number of the OEM's challenging use cases that are viewed as critical for commercialization. For example, a highway merge scenario where the truck needs to know what is approaching from behind from a far distance, given the amount of time it takes for the vehicle to accelerate to highway speeds. AVA 40 LIDAR consistently offered further and faster detection and classification of critical objects than one was possible before with the existing sensor set. With plans to ramp to significant volumes, Domino Truck views Ava's LiDAR on chip technology with a fiberless silicon-based architecture and our manufacturing capability as key differentiators that will enable us to support their production ramp. As part of the RFQ process, Domino Truck also conducted extensive audits of our manufacturing line, internal processes, and supply chain partners to ensure they meet the strict requirements of Domino Truck standards. We are incredibly proud to have received the highest rating category for manufacturing readiness and the confidence of Diamond Truck and Ava to act as a tier one supplier for the Sears production program. This is no small feat, especially for a company at our stage and points to the maturity and the quality of our organization. I want to end the section on Diamond Truck with why we are thrilled to be partnered and going to market together. AVA's strategy continues to be partnering with leaders in their respective markets who have a shared commitment, as well as the ability to scale deployments of LIDAR to mass volumes, and this strategy is starting to pay off. Down the Truck is incredibly well positioned as a global leader in commercial vehicles, with volumes north of 500,000 units annually. As mentioned earlier, our production program win starts with a Class 8 Freightliner platform. which is the top-selling platform in its segment at around 100,000 vehicles annually, and representing 40% of the Class 8 market share. And within this, Delmar Truck has 60% share of the large US fleet buyers of Class 8 trucks, the likely first adopters of autonomous trucks. Importantly, Delmar Truck is also a leader in commercializing new technology. being first to deploy level two capabilities in series production in North America in 2019. They have a deep understanding of the needs of their customers and see highway autonomy as the next key strategic objective and logical step for the industry. Because for fleet operators, it is all about total cost of ownership and enabling hub-to-hub autonomous operations that can meaningfully improve efficiency while reducing costs. As part of the path to commercialization, Diamond Truck subsidiary Torque is already deploying pilot autonomous programs with leading logistics operators such as Schneider and CR England to capture real-world insights and ensure critical requirements are met for serious production. As Diamond Truck's CEO reaffirmed on its earnings call last week, highway autonomy is a top strategic focus for the OEM. They continue to make strong progress from hardware, including sensors, to the software stack, keeping them on track for serious production and commercialization by 2027. From there, Dalmatruck has publicly shared plans to reach significant volume scale with annual autonomy revenue contribution of $3 billion for Dalmatruck by 2030, and we look forward to supporting their ramp. Let's now turn to Abo's growing commercial momentum. 2023 marked an inflection point as we began converting our engagements to multiple production awards in automotive and industrial. The adoption of FMCW technology is gaining traction, and we expect to continue to drive this in 2024. Following our Diamond Truck production win, we have seen an uptick in our momentum in automotive. Aligned with our strategy, our focus is on winning large production programs with customers well-positioned to commercialize at scale. We are currently engaged in multiple passenger vehicle RFQs, including with a new global top 10 passenger vehicle OEM, and expect award decisions in the next six to nine months. The growing adoption of FMCW is becoming clear, starting with commercial vehicles, and we expect the rest of automotive to move in the same direction. With diamond truck selection to use AVA 40 LIDAR, three of the top four OEMs representing the vast majority of the North America Class 8 market are now implementing FMCW for highway autonomy. This is a strong validation of the fundamental advantages of FMCW, where long range, instant velocity, and immunity to interference can enable safe, autonomous operation at highway speeds. At AVA, we continue to progress on multiple opportunities for additional commercial vehicle programs. In passenger vehicles, a growing number of industry participants are publicly pursuing FMCW for next generation solutions. Based on our engagements with OEMs, a number of the opportunities we are seeing the most traction are with OEMs experienced with LIDAR that see FMCW as a key enabler to future-proof their plans to achieve highway autonomy at highway speeds. In the start of the year, this now includes multiple passenger vehicle OEM RFQs and a new top 10 passenger vehicle OEM. We expect these programs to start being awarded in the next six to nine months. While we continue to work on additional production program wins, we are also on track to begin commercialization by the end of this year for our first industrial launch with Nikon. We will follow this with automotive SOPs starting in 2025 and reaching scale by 2027. Moving now to our latest product development. At CES earlier this year, we introduced and demonstrated Atlas, which is the world's first automotive-grade 4D LiDAR designed for automotive production. We believe Atlas will unlock the industry's ability to adopt FMCW for highway speed automation at scale. Atlas is powered by our latest proprietary silicon innovations, including CoreVision, our fourth-generation LiDAR-on-chip module, which continues to integrate all optical components onto an even smaller module. Compared to conventional high-performance time-of-flight LiDAR, AVA's solution is completely fiberless and leverages a silicon photonics architecture to enable automated assembly for mass manufacturability at affordable cost. In addition, Atlas utilizes AVA X1, our new powerful FMCW LiDAR system on chip that seamlessly integrates data acquisition, going cloud processing, scanning, and application software. To our knowledge, this is a first in the industry and comes after multiple years of investments in house silicon development and validation. As a result of these enhancements, Atlas is over 70% smaller and consumes a quarter of the power of the previous generation, which enables passive cooling and new OEM integration options, such as behind the windshield. Diamond truck is the first major OEM to go to production with Atlas. I would now like to discuss our key goals for 2024. At a high level, our focus remains on converting our growing commercial momentum to production awards while preparing for our first SOP. First, we target winning two additional production programs in 2024. We are engaged in a number of automotive RFQs for production, including with a new global top 10 passenger vehicle OEM. In industrial, we also see opportunity to convert current engagements to wins with leading companies looking to leverage our unique FMCW for the next generation solutions. Second, we plan to complete Atlas qualification ahead of deployments starting in 2025. This includes final iteration on our X1 SOC and completing the evaluation of our Atlas products. Third, we plan to finalize our supply chain and complete the design of our automated and automotive qualified production line as we approach our first SOPs. And fourth, as we have demonstrated over the past years, we plan to accomplish these objectives while maintaining a strong financial position and discipline with spend. As Saurabh will discuss next, we target maintaining OPEX similar to the levels in 2023. With our strong balance sheet and strategic approach to investing, we are well positioned to execute on our plan and deliver on the growing momentum around FMCW. With that, let me turn the call over to Saurabh.